Government House announced Tuesday that Gov. John deJongh Jr. has signed two bills that will allow the territory to close a dispute with the Internal Revenue Service and to refinance bonds, saving the territory millions of dollars.
The Senate passed the two bills during a special session Aug. 20. The governor announced he had signed the bills in a letter dated Friday and released to the media Tuesday. The letter was addressed to Senate President Shawn-Michael Malone.
Bill 30-0198 – now Act 7508 with its signing into law – appropriates $13.9 million from the General Fund to settle a dispute with the IRS about whether tax-exempt bonds issued in 2006 were improperly used to refinance earlier bonds issued by the territory.
In March 2012, the IRS determined the government had revenues during 2006 that should have been used to retire 1999 bonds, instead of using the 2006 funds, which were tax exempt and only for working capital.
Funding for the settlement came initially from a recently authorized $40 million line of credit, but is to be replaced as soon as possible by government bonds.
The bill also provides that any money received through legal action against "any party found responsible" shall be applied to the repayment of any borrowing required to pay the settlement, the governor noted in his letter.
Bill 30-0199 – now Act 7509 – authorizes the government to refinance as much as $90 million in existing bonds at lower rates. This should save about $23.9 million per year, narrowing a sizable hole in the Fiscal Year 2014 budget.
Both bills had passed the Senate by votes of 14-1, with only Sen. Kenneth Gittens voting against.
During the same Senate session, the governor had asked the senators to approve a $5 million appropriation for impending litigation with Hovensa over the shuttered St. Croix refinery. Senators voiced support for the measure, but decided to include the decision on the funding in their deliberations over the FY14 budget.
The other measure faced looming deadlines which required immediate reactions, the senators said, but the litigation expenses can be considered as part of the overall budget.
With the Senate’s rejection of the proposed Fourth Amendment Agreement, which would have established a framework for sale of the refinery, the government and the company are at loggerheads over whether the closure of the facility and its conversion into an oil storage facility breach the operating agreement. Hovensa has since announced it plans to close the storage facility and fuel rack which is used to provide automobile, generating and air fuel for the territory.
Unless both sides agree to mediation, rejection of the amendment all but assures that the territory will be involved in litigation that observers have said could last 10 years. During the Aug. 20 Senate session, Attorney General Vincent Frazer warned that the $5 million is just the start of what is likely to be a long and expensive process.